The vast majority of financial advisors expect the S&P 500 to rise by 10% or more by the end of 2025 compared to its level between November 6 and November 13, 2024, according to the InspereX Pulse 2025 Outlook Survey.
The study, which surveyed 682 U.S. advisors, found that 67% expect the S&P 500 to rise by 10%, 14% foresee a 20% increase, and 2% expect the S&P 500 to climb by more than 20%. Conversely, 10% believe the S&P 500 will remain stable, while 7% predict declines of at least 10%.
Meanwhile, 69% believe equities will be the best-performing asset class in 2025, with cryptocurrencies emerging as the second most attractive asset: 11% bet they will be the most profitable.
Although expectations for the year are optimistic, 80% of respondents anticipate a significant drop in the S&P 500 at some point during the year. Given these forecasts, 72% of advisors stated they are likely or definitely planning to add more downside protection strategies to client portfolios in 2025.
“Advisors are certainly bullish, but much of their optimism aligns more closely with historical averages. When we combine this with expectations of high volatility, including at least one correction or worse, it means investors will need to endure uncertainty to achieve returns that might be harder to secure,” said Chris Mee, Managing Director at InspereX.
The Fed and the Situation of the Economy in 2025
More than two-thirds (68%) of advisors expect the Federal Reserve to cut the federal funds rate two or three times in 2025. Only 10% foresee four or more cuts, while 5% expect the Fed to remain neutral. Just 2% anticipate one or more rate hikes.
As a result, 46% of advisors believe the Fed will achieve a soft landing, 25% anticipate a “no landing” scenario, 22% believe the Fed has already achieved a soft landing, and 7% expect a hard landing.
What Concerns Advisors the Most?
Regarding concerns, geopolitics tops the list for nearly a third of advisors (31%). Inflation is the second-most worrying issue for 27%. Additionally, 15% are troubled by market volatility, 11% are concerned about the new presidential administration, 8% worry about tax increases, and 8% focus on interest rate policy. Advisors noted that their clients are less worried about the macroeconomic outlook and tend to prioritize immediate risks, the study adds.
Under these analyses, 53% of advisors said they would not make strategic changes to client portfolios based on election outcomes, 24% said they would add downside protection as a result of the elections, 6% would adopt a more conservative approach, and 17% would take a more aggressive stance. When rating their clients’ anxiety on a scale from 1 to 10, advisors reported an average of 5.1. This suggests that end investors are not overly anxious about the country’s and markets’ outlook over the next 12 months, according to the study.
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